COMMISSIONER OF INCOME TAX Vs. VARADALAKSHMI MILLS LIMITED

JUDGEMENT

(1.) IN pursuance of the direction given by this court in T. C. P. No. 381 of 1979, dated January 5, 1979, the Tribunal referred the following question of law for the opinion of this court under section 256(1) of the Income -tax Act, 1961 Whether, on the facts and in the circumstances of this case, the Appellate Tribunal was correct in holding that the ' general reserve ' as on the first day of the previous year should not be reduced by the amount of dividend declared at a future date at the general body meeting for the purpose of computing the capital base under the Companies (Profits) Surtax Act, 1964 ? "

(2.) A similar question came up for consideration before the Supreme Court of India in the case of Indian Tube Co. P. Ltd. v. CIT 1992 (194) ITR 102, 1992 (1) JT 112, 1992 (1) Scale 26, 1992 (1) SCR 22, 1992 (101) CTR 446, 1992 (60) TAXMAN 399, 1992 (101) CTR(SC) 446 wherein the Supreme Court held, affirming the decision of the High Court, that though the general body of the shareholders resolved and appropriated the sum of Rs. 76 lakhs towards the dividend from the reserve of Rs. 90 lakhs on May 31, 1963, the appropriation related back to the calender year 1962 to which it related and, as or January 1, 1963, the sum of Rs. 76 lakhs was a provision and only Rs. 14 lakhs could be treated as a reserve in the computation of capital for the purpose of surtax.